1977 (5) TMI 34 - AT - Income Tax

Summary

Issues Involved:

1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961.
2. Determination of the previous year for the assessment year 1972-73.
3. Allegation of concealment of income or furnishing inaccurate particulars.

Detailed Analysis:

1. Levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961:

The appeal was directed against the order of the Inspecting Assistant Commissioner of Income-tax levying a penalty of Rs. 52,620 under Section 271(1)(c) for the assessment year 1972-73. The assessee argued that the firm had closed its accounts before the expiry of 12 months due to differences among the partners and that the closing of accounts earlier than the date mentioned in the deed of partnership was not intentional with a view to avoid tax. The assessee also submitted that it had offered the sum of Rs. 52,619 for the assessment year 1973-74, thus negating any concealment of income. However, the Inspecting Assistant Commissioner did not accept these contentions, asserting that the firm was dissolved on 31st August 1971 and the accounts should not have been closed on 3rd July 1971, implying an intention to evade tax.

2. Determination of the previous year for the assessment year 1972-73:

The Income-tax Officer determined that the previous year must be taken to have ended on the date of dissolution, i.e., 31st August 1971, and therefore, the sum of Rs. 52,619 received before this date was assessable in the assessment year 1972-73. The assessee contended that the firm's accounts were closed on 3rd July 1971, and the rebate was received subsequent to this date. The Tribunal found that the assessee had been accounting for rebates in the year the credit note was received, a practice accepted by the Department. The credit note for Rs. 52,619, though dated 30th June 1971, was received on 13th July 1971, after the accounts were closed on 3rd July 1971. Therefore, the assessee did not account for the rebate in the accounts made up for the period ending 3rd July 1971.

3. Allegation of concealment of income or furnishing inaccurate particulars:

The Tribunal examined whether the assessee was prompted by a motive to evade tax by closing the books on 3rd July 1971 instead of 31st August 1971. It was noted that the firm stopped its business activities on 9th June 1971 due to differences among the partners and that the business was taken over by the remaining three partners. The Tribunal found that the firm, for all practical purposes, stood dissolved on 9th June 1971, and the accounts were closed on 3rd July 1971 after necessary adjustments. The Tribunal concluded that there was no concealment of income or furnishing of inaccurate particulars by the assessee as the relevant credit note was received after the accounts were closed. The Tribunal held that even if the assessee intentionally closed its books on 3rd July 1971 to avoid tax, it did not amount to concealment of income or furnishing inaccurate particulars. The fact that the assessee offered the income for the assessment year 1973-74 further supported the absence of concealment.

Conclusion:

The Tribunal canceled the penalty levied by the Inspecting Assistant Commissioner, concluding that the provisions of Section 271(1)(c) were not attracted. The appeal was allowed, and the assessee was not found guilty of concealment of income or furnishing inaccurate particulars.